Are stocks very risky?

First, let's not dispute whether the statement "stocks are very risky" is right or not. Let's start with this question:

Suppose there is an asset that takes up a huge amount of capital. If you have no money, you have to borrow money to buy it;

In addition, this asset will fall by 30% in half a year when encountering various disturbances. And you cannot make money back for several years;

At the same time, the liquidity of this asset is also very general. When you are anxious about current situation, you can't sell it. But if you really want to buy it at the bottom, no one may sell it to you for several months.

So, do you think this kind of asset is very risky?

Some people may have thought that this asset is houses. So, is it very risky to buy a house ? I think the answer of most people is no, at least it is much less risky than buying stocks.


Why do we think buying a house is not very risky?

The whole East Asian nation, Europe and the United States, have a strong belief in buying a house. About two-thirds of the more than 300 trillion dollars of wealth is in the form of real estate, and housing accounts for more than 70%.

Buying a house is much easier than buying stocks. There are some variables that need to be considered when buying a house: location, house type, surrounding supporting facilities, property level of developers, etc., which are much less than the factors that need to be considered when buying stocks.

Therefore, it is difficult to buy a house by mistake in most cases. Even if it is wrong, it is definitely not a disastrous result.


However, if a stock is selected incorrectly, it may be the essential difference between a 3 times increase in value and a 1/3 decrease in value. From this perspective, the risk of buying a house is indeed much lower.

Another reason is that there is no trading system like the stock exchange for real-time quotation and instant trading in the real estate market. Therefore, even if the price fluctuates in various ways, people will not feel it. Or even if you feel it, you can't sell it right away.

Whether you invest or not, you will be confronted with various financial news, comments and even rumors every day, and the market will make various reactions to these news every day. Looking at the ups and downs of the figures in our accounts, many people find that it’s hard to resist the immediate temptation of chasing up and down.


How to deal with risks?

First of all, we can determine that fluctuation is not equal to risk.

For ordinary people, the first priority of investment is to invest in a long-term upward market. For relatively professional investors, it is possible for us to make money in a market that has been choppy and fluctuating up and down. But for most people, if our investment target is upward for a long time, even if it fluctuates in the middle, there is a great possibility of obtaining positive returns.

Great fluctuation is not a risk. The possibility of loss is not a risk. Only pretending to understand stocks is the biggest risk.